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Finance Minister Arun Jaitley took to Facebook to convey to the countrymen about the virtues of demonetisation, announced by Prime Minister Narendra Modi about two months ago.
Jaitley, replying to those raising doubts over the efficacy of demonetisation in eliminating black money, said the colour of funds would not change by merely depositing these in banks. The money had now lost its “anonymity” as it can be traced to the owner. “The fact that a large quantum of high denomination currency has been deposited with the banks does not render this money to be legitimate cash. Black money does not change its colour merely because it is deposited in the bank. On the contrary, it loses its anonymity and can now be identified with its owner.”
The comments came in the wake of sources saying that 94 per cent of the junked notes have come back into the bank accounts, casting doubts on the effectiveness of the demonetisation in checking black money.
The pains and inconveniences caused by the note ban were nearing its end, said the minister. “When 86 per cent of a country’s currency, constituting 12.2 per cent of its GDP, is squeezed out of the market and sought to be replaced by a new currency, there would obviously be significant consequences of that decision,” he said, adding that the queues outside the banks have disappeared and re-monetisation has moved ahead.
In a post, Demonetisation — A look back at the last two months, the finance minister said the money collected would be put it to more effective uses.
In the medium and long run, gross domestic product (GDP) would be bigger and cleaner, he said two days after the Advance Estimates put out by the Central Statistics Office projected the economy to grow slower at 7.1 per cent in the current financial year, against 7.6 per cent in the previous financial year, before factoring in the impact of the demonetisation. Economists have pegged growth in the current financial year to be lower than 7.1 per cent.
Ahead of the Budget, the finance minister said when the Centre and the states were able to collect more tax from tax dodgers, they would be in a better position to collect less tax from others.
He also attacked the Opposition, particularly Congress Vice-President Rahul Gandhi. “The difference between Prime Minister Narendra Modi and Rahul Gandhi was clear — the Prime Minister was thinking of the next generation while Rahul Gandhi was only looking at how to disrupt the next session of Parliament.”
The Revenue Department, he said, would be entitled to tax this money. “In any case, the amendment to the Income Tax Act itself provides that the said money, if voluntarily declared or if involuntarily detected, would be liable for differential and high rates of taxation and penalty.”
A large amount of cash with banks will lead to lower interest rates, said the minister. Leading banks have announced cuts in lending rates.
"The banks today admittedly have a lot more money available in order to lend for growth. Since this money constitutes low-cost deposits with the banks, it is bound to bring down the rate of interest. Both these things have already happened," he added.
Top quotes of Arun Jaitley's take on two months of demonetisation:
- The Prime Minister is now speaking of cleaning the political funding systems. His opponents want a cash dominated, cash generating and cash exchange system to continue
- All reforms are disruptive. They change the retrograde status quo
- It is a tragedy that a national party like the Congress decided to adopt a political position, opposing technology, change and reforms
- Reducing cash may not eliminate crime and terrorism but it can inflict a serious blow on them
- Expenditure required for poverty eradication, national security and economic development have to be compromised with on account of tax non-compliances
- Paper currency is a zero-interest anonymous bearer bond
